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    An optimal auction with moral hazard

    Pancs, R. and Nikandrova, Arina (2015) An optimal auction with moral hazard. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    Abstract We consider a single-item, independent private value auction environment with two bidders: the leader, who knows his valuation, and the follower, who exerts an effort that affects the probability distribution of his valuation, which he then learns. We provide sufficient conditions under which an ex-post efficient revenue-maximizing auction solicits bids sequentially and partially discloses the leader’s bid to the follower, thereby influencing the follower’s effort. This disclosure rule, which is novel, is non-monotone and prescribes sometimes revealing only a pair to which the leader’s bid belongs and sometimes revealing the bid itself. The induced effort distortion relative to the first-best is discussed.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: ISSN 1745-8587: BWPEF 1504
    Keyword(s) / Subject(s): Information Disclosure, Conjugate Disclosure, Optimal Auction, Moral Hazard
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 20 May 2016 09:29
    Last Modified: 14 Mar 2017 12:10
    URI: http://eprints.bbk.ac.uk/id/eprint/15275

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